Setting transfer prices can be especially problematic when:
A) Managers are evaluated based on non-financial factors
B) Compensation is tied to the financial performance of responsibility centres
C) Centralized decision-making is the organizational norm
D) Compensation is tied to the financial performance of the organization as a whole

Question

Quizplus · Accepted Answer

Setting transfer prices can be problematic when compensation is tied to the financial performance of responsibility centres because managers may manipulate transfer prices to benefit their own centres, potentially at the expense of the overall company performance.

Setting Transfer Prices Can Be Especially Problematic When